Who ARE You???

I did an interview with the folks at moneyaudio.com the other day, and Tim asked a good question about who is out there learning to trade in this environment. Iâd like to throw this out to the Elitetrader community and see who is out there these days.

The folks who have been coming to my position trading room in recent months are much more serious about their trading. Gone are the folks who saw an infomercial and want to be hot stock traders by next Thursday. Itâs been great for me, since these folks really listen and are interested in skill building.
Every once in a while we get somebody who wants calls calls calls, and thinks you can just manufacture market opportunity at will, but this market soon takes care of them

So here is the question...

Who are you?

Are you a beginner? Somebody just starting to learn about how the markets work and what you need to do to take money from them?

An advanced amateur? Somebody who knows the ropes, but is not making money consistently.

Struggling trader? Somebody who has been consistent in the past, but who has been struggling to stay in the black in the recent market chop.

Consistent Pro? Somebody who may have seen their average monthly profit slip a bit, but who is still making a nice living from their trading.

When we see the newbie totally vanish, the advanced amateurs throwing up their hands, and the strugglers flaming out, it will be time to start looking for the market bottom. Iâm getting some of those vibes now, and wonder what the makeup is in the Elitetrader community these days.

I am a struggling trader. Oh God am I struggling! Fairly new at it (2 1/2 years) and a long ways from making a living at it(2 1/2 years according to my calculations). Watching the situation evolve is fascinating. I think your right in that those getting into it now are more serious having seen the downside but judging from a lot of posts here most still do not have any idea how hard it is.

The current market has surely kept everybody on their toes. The good old trend trading tactics that I used for ages are all breaking down. You have to be deviant in this market and think ...âwhat could the market do at this point to ruin every bodies day?â Look at a 15 min chart of WM from Friday. The market was starting to reverse, and I saw this stock with a nice daily swing short pattern. It had set up and had followed through about 1.5 to 1 if you used the daily bars fo setup/entry. It was forming a higher low intra day.....If you were short wouldnât you be cringing and saying â$#!&!! Here it goes again, damn thing sets up, trends a little then flushes the toilet.â I went long @36.08, a play which even 6 months ago would have been stupid and way too countertrend for my taste. But the market right now is dominated by the faders, so if you canât beat âem...join âem!

One thing to do if you are struggling... try the âsupermanâ test. Look back at the trades for the last two weeks. If you were superman and could sell with the benefit of hindsight, would you have made money? In other words, does you strategy have a positive expectation. If there are good patterns, but they are just not working, look for ways to adjust entry/stop, or look for ways to play them as they fail. If that still does not work, it's time to shift strategies.

My struggle is mainly with myself. When you make money four out of five days but cant get ahead, the market is not the problem. Any advice on how to avoid those blowout days? Did you ever have that problem? I know your not the most even tempered guy around?

Good question and I wish I had a plain, pithy and powerful, Zen-like answer.

As I've indicated elsewhere on this board, I started trading full time three and a half years ago, after working for a major company for 18 years. At that point, I read many books, took several seminars and bought a few trading systems.

I did extremely well in 1999 and early 2000. Then I spent the summer and fall of 2000 wishing that the drop had never happened (bought every dip) and finally, after Christmas, my beloved wife kicked me back into reality. I spent 2001 selling short at least as much as I was buying long (and even more) and also learning to trade leveraged instruments like index options and the s&p e-minis, which can really allow you to earn a living.

I now trade several accounts (all mine) each with a different approach and objectives. This includes trading stocks, options, and futures -- intra-day, swing, position and longer term. The works!

Overall, I'm doing fine - thank God - 2002 is shaping up pretty well. Although I still have lots of room for improvement (who doesn't) I see myself as a reliable, consistent professional trader, who loves researching and adopting new tools and techniques, and also (luckily) has great fun playing this game day in and day out.

Originally posted by easyrider My struggle is mainly with myself. When you make money four out of five days but cant get ahead, the market is not the problem. Any advice on how to avoid those blowout days? Did you ever have that problem? I know your not the most even tempered guy around?

More...

Can you quantify what happens on the fifth day. Is there a way to pinpoint the general source of your losses. Different market activity, different emotional state.

If not, take a look at your methodology. Is it possible you are using a method that works 80% of the time but frags you the other 20% and thus has high winning percentage but negative expectation (many short term systems do).

If it's emotional/discipline based and all else fails, force yourself to stop trading for three days any time you break a hard and fast rule. Or if that's too painful, buy a cattle prod and shock yourself with it (just make sure to step away from any electrical wiring first).

Hmm. I like the cattle prod idea. Thx. What happens on the fifth day? I start off with a loser. I am very good at catching the first move so it really pisses me off when I am wrong. Once I get mad everything I have learned goes out the window. The answer is obvious. When the first trade is a loser, stop. This is easy. I do it all the time. I'm done for the day! A little later I'll flip on the charts, "just to see how the markets doing" Hmm. Thats an interesting pattern. How can I pass up such an obvious winner? You know the rest of the story.

>My struggle is mainly with myself. When you make money four out of five days but cant get ahead, the market is not the problem.

Yup, you have pegged it, there is some error that is holding you back.
>Any advice on how to avoid those blowout days? Did you ever have that problem?

Yes I used to, it was when I was trading off 1 min charts. I would trade very well, taking profits right and left. But sometime during the week Iâd get slipped badly, or get stuck in a futures spike, and dump back a great deal of my profit. I began to trade deeper timeframes (15 min and up), and these uncontrolled losses vanished. When you have a .40 stop and 1.00 expectation, getting slipped for a dime is not going to ruin your week

If your doing well 4 out of 5 days, then you should be upbeat! You are damaging yourself on the 5th day with some kind of trading error. Fix this and you should see immediate results.

Look at those âblowoutâ days, and see if you can see a pattern. Knowing nothing about you, my first guess (if you are a daytrader) is that you start out on the wrong side of the market, get thumped a few times, then try to claw your way back into the black. If your average day is 5 trades, you make 12 on these days and your win rate drops like a stone. If this hits home, look back at your logs, and find our how many trades you make on your better days. Then set a limit for yourself, and donât exceed this. Leaning to manage the payout/payback cycle for your style is key to pressing the edge inherent in the setups you trade.

>I know your not the most even tempered guy around?

Not in the beginning, I had the sweaty palms, and upset stomach as I lived and died on every tick. Once I began to see trading as a process, the outcome of each trade became less desperate. (Damn I wish âTrading in the zoneâ had been published as I was learning )

Now I really could give a rats posterior what any particular trade does. I still get enjoyment from an âartsyâ trade, but the outcome just isnât a big deal.. (Had a stock the other day, short squeezed to within 3 cents of my stop, then dropped with the futures, I scratched it for -.03, figuring it was headed for the stop. 3 mins later then it slammed higher... thatâs fun)
I pretty much set up my trades, then ignore them. Stops and limit orders do the rest. Iâm usually doing 5 things at once, teaching in the room, talking on the phone, music going... Trading is a whole lot easier and more fun when you get to the point where you donât think, you just âdoâ

Any jugglers out there? Trading is much the same. Early on, you concentrate like mad as you try to keep 3 balls in the air. It takes total focus and concentration. Any distraction and you are lost. Then after you get the hang of it, you can juggle while talking, walking, riding a unicycle..... Trading is very much the same.

Look at your logs, find out what your âpoint of no return is.. Do you ever come back after that first loser? I found when day trading that 3 stops was my trigger. Any day when I took 3 stops was a âbadâ day, and was probably about to get worse. So, as soon as the 3rd stop loss order triggered, I was done for that day. This rule saved my assets time and again.